When we last discussed Hungary's economy on Jan 19, 2012, it had just been announced that Hungary had agreed to the demands that the EU and IMF had been making regarding central bank independence and taxation (
click here to see a list of posts for a more detailed history). At that time, Hungarian equities were up close to 12% for the year and the Forint had strengthened over 3% against the US Dollar. Fast forward almost two weeks to today. The positive trend has strengthened with the Hungarian stock market now up over 23% and the Forint up over 9% vs the Dollar, making it the best performing currency so far this year.
The USDHUF cross has been on a wild ride since the beginning of 2011 with a 45% change from the lowest point to the highest point. Planning any kind of budget or coming up with a revenue forecast in Hungary must be quite the challenge.
The primary motivation for the perceived continued improvement, as far as we can tell, is an expected positive response to the request for IMF funds.
We're also seeing this same IMF plot line with Egypt. The IMF is a very popular organization these days so hopefully they get the extra money they've been asking for.
From the Financial Times:
The International Monetary Fund has asked its member countries for an extra $500bn in firepower to combat the world’s spreading fiscal emergencies, which it estimates will generate demand for bail-out loans totalling $1tn over the next two years.
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